GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table presents a summary of the activity in goodwill by reporting segment for the years ended December 31, 2013 and 2012:



	Dec. 31, 2011 ⁽¹⁾		Acquisitions		Dec. 31, 2012 ⁽¹⁾		Acquisitions ⁽²⁾		Dec. 31, 2013 ⁽¹⁾
	(Dollar amounts in millions)
Residential Ventilation (“RESV”):
Gross goodwill	$	156.8	$	—	$	156.8	$	—	$	156.8
Impairment losses	—		—		—		—		—
Net RESV goodwill	156.8		—		156.8		—		156.8
Technology Solutions (“TECH”):
Gross goodwill	19.4		—		19.4		65.9		85.3
Impairment losses	—		—		—		—		—
Net TECH goodwill	19.4		—		19.4		65.9		85.3
Display Mount Solutions (“DMS”):
Gross goodwill	131.4		—		131.4		—		131.4
Impairment losses	—		—		—		—		—
Net DMS goodwill	131.4		—		131.4		—		131.4
Consolidated goodwill:
Gross goodwill	307.6		—		307.6		65.9		373.5
Impairment losses	—		—		—		—		—
Net consolidated goodwill	$	307.6	$	—	$	307.6	$	65.9	$	373.5


(1)	The Residential Heating and Cooling ("RHC") and Custom & Engineered Solutions ("CES") reporting units did not have goodwill in any period presented.


(2)	Acquisition adjustments recorded during 2013 for the TECH segment relate to the acquisition of Gefen Distribution and 2GIG. See Note 2, “Acquisitions and Other Investments”.

The Company accounts for acquired goodwill in accordance with ASC 805 and ASC 350. Under ASC 350, goodwill is not amortized. Instead, it is evaluated for impairment on an annual basis, or more frequently when an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value, including, for example, a significant adverse change in the business climate. The Company has set the annual evaluation date as of the first day of its fiscal fourth quarter. The reporting units evaluated for goodwill impairment have been determined to be the same as our operating segments. Only the RESV, DMS and TECH reporting units have goodwill and, therefore, are the only reporting units that currently are required to be evaluated for goodwill impairment.

In 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-8”), which introduced an optional qualitative assessment for testing goodwill impairment. Under ASU 2011-8, if the Company concludes that it is more likely than not that the fair value of a reporting unit exceeds the carrying amount, then the Company is not required to perform the two-step impairment test under ASC 350. The Company adopted ASU 2011-8 in 2011 and used the qualitative assessment approach in connection with the Company's 2012 annual impairment evaluation for the RESV and DMS reporting units, and its 2011 annual impairment evaluation for the RESV, DMS and TECH reporting units. The Company used the quantitative assessment approach in connection with its 2013 annual impairment evaluation for the RESV, TECH and DMS reporting units and its 2012 annual impairment evaluation for the TECH reporting unit. Although the Company does not believe that there are any indicators of goodwill impairment, the Company believes that it is appropriate to periodically perform quantitative analysis of goodwill to provide a basis of support for future qualitative assessments, which is the reason that the Company used the quantitative assessment approach in 2013.

When applicable, the Company utilizes a combination of a discounted cash flow (“DCF”) approach and an EBITDA multiple approach in order to value the Company's reporting units required to be tested for impairment. These non-recurring fair value measurements are primarily determined using unobservable inputs. Accordingly, these fair value measurements are classified within Level 3 of the fair value hierarchy.

The DCF approach requires that the Company forecast future cash flows of the reporting units, and discount those cash flow streams based upon a weighted average cost of capital (“WACC”) that is derived, in part, from comparable companies within similar industries. The DCF calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable reporting unit. The Company believes that its procedures for estimating DCF, including the terminal valuation, are reasonable and consistent with market conditions at the time of estimation.

The EBITDA multiple approach requires that the Company estimate certain valuation multiples of EBITDA derived from comparable companies, and apply those derived EBITDA multiples to the applicable reporting unit's estimated EBITDA for selected EBITDA measurement periods.

2013 Goodwill Impairment Testing

For the 2013 annual impairment test for RESV, DMS and TECH, we estimated the fair value of each of the reporting units using a weighted average of 50% for the DCF approach and 50% for the EBITDA approach, which we determined to be the most representative allocation for the estimate of the long-term fair value of the reporting units. The RESV valuation assumed a taxable transaction while the DMS and TECH valuations each assumed a non-taxable transaction, with WACC’s of 13.2%, 13.4% and 14.5%, respectively, and EBITDA multiples in the range of 7.5x to 8.0x, 6.5x to 7.5x and 7.0x to 8.5x, respectively, for the selected measurement periods of the latest twelve months through September 30, 2013, and forecasted 2013 and 2014. As the estimated fair value of RESV, DMS and TECH was greater than the carrying value, no Step 2 test for goodwill impairment was required. The Company did not prepare updated goodwill impairment analyses as of December 31, 2013 for any reporting unit, as there were no indicators during the quarter that would have required such analysis.

We believe that our assumptions used to estimate the fair value of RESV, DMS and TECH as of the first day of the fourth quarter were reasonable. If different assumptions were used, particularly with respect to estimating future cash flows, weighted average costs of capital, and terminal growth rates, different estimates of fair value may have resulted. The estimated fair values of the RESV, DMS, and TECH reporting units would have to decrease by approximately 50.7%, 39.5%, and 23.8%, respectively, before a potential impairment would be recognized.

2012 Goodwill Impairment Testing

For the 2012 annual impairment test for RESV and DMS, the Company determined, based on the qualitative analysis performed in accordance with ASU 2011-08, that it was more likely than not that the fair value of each of RESV and DMS was greater than their carrying amounts as of the first day of the fourth quarter. Accordingly, the Company was not required to perform the two-step impairment test under ASC 350 as of that date with respect to these reporting units.

For the 2012 annual impairment test for TECH, we estimated the fair value of the reporting unit using a weighted average of 50% for the DCF approach and 50% for the EBITDA approach, which we determined to be the most representative allocation for the estimate of the long-term fair value of the reporting unit. The TECH valuation assumed a taxable transaction, with a WACC of 16.9%, and EBITDA multiples in the range of 7.5x to 8.5x for the selected measurement periods of the latest twelve months through September 29, 2012, and forecasted 2012 and 2013. As the estimated fair value of TECH was greater than the carrying value, no Step 2 test for goodwill impairment was required.

2011 Goodwill Impairment Testing

In 2011, the Company determined, based on qualitative analysis in accordance with ASU 2011-08, that it was more likely than not that the fair value of each of the three evaluated reporting units was greater than their carrying amounts as of the first day of the fourth quarter. Accordingly, the Company was not required to perform the two-step impairment test under ASC 350 as of that date.

Other Intangible Assets

The table that follows presents the Company's major components of intangible assets as of December 31, 2013 and 2012:



	Gross Carrying Amount		Accumulated Amortization			Net Intangible Assets		Weighted Average Remaining Useful Lives
	(Amounts in millions, except for useful lives)
December 31, 2013
Trademarks	$	164.8	$	(30.7	)	$	134.1	16.5
Developed technology	77.0		(23.2		)	53.8		9.0
Customer relationships	562.3		(109.3		)	453.0		13.6
Others	23.4		(15.4		)	8.0		3.4
	$	827.5	$	(178.6	)	$	648.9	13.7

December 31, 2012
Trademarks	$	159.9	$	(23.2	)	$	136.7	18.2
Developed technology	70.3		(16.4		)	53.9		10.3
Customer relationships	488.5		(75.9		)	412.6		15.3
Others	23.5		(11.8		)	11.7		5.4
	$	742.2	$	(127.3	)	$	614.9	15.3

Developed technology, trademarks and customer relationships are amortized on a straight-line basis. Amortization of intangible assets charged to operations amounted to approximately $51.3 million, $44.3 million, and $44.8 million for the three years ended December 31, 2013, respectively.

As of December 31, 2013, the estimated future intangible asset amortization expense aggregated approximately $648.9 million as follows:



Year Ended December 31,	Annual Amortization Expense
	(Dollar amounts in millions)

2014	$	53.5
2015	53.1
2016	49.6
2017	49.5
2018	49.3
2019 and thereafter	393.9

In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), the Company evaluates the realizability of long-lived assets, which primarily consists of property and equipment and definite lived intangible assets (the “ASC 360 Long-Lived Assets”), when events or business conditions warrant it, as well as whenever an interim goodwill impairment test is required under ASC 350. ASC 350 requires that the ASC 360 impairment test be completed, and any ASC 360 impairment be recorded, prior to performing the goodwill impairment test.

The evaluation of the impairment of long-lived assets, other than goodwill, is based on expectations of non-discounted future cash flows compared to the carrying value of the long-lived asset groups. If the sum of the expected non-discounted future cash flows is less than the carrying amount of the ASC 360 Long-Lived Assets, the Company would recognize an impairment loss if the carrying amount of the asset group exceeds its fair value. The Company's cash flow estimates are based upon future projected cash flows received from subsidiary management in connection with the Company's annual planning and interim forecasting process, and, if appropriate, include a terminal valuation for the applicable subsidiary based upon an EBITDA multiple. The Company estimates the EBITDA multiple by reviewing comparable company information and other industry data. The Company believes that its procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with current market conditions for each of the dates when impairment testing has been performed.

For the year ended December 31, 2013, the Company recorded a non-cash impairment charge of approximately $4.3 million within COGS related to the write-down of property and equipment in connection with the exit in the first quarter of 2014 of a product line within the RESV segment. There were no other long-lived asset impairment charges recorded during 2012 or 2011.